Bank of America’s trading desk is advising clients to acquire US momentum stocks, asserting that the group has reached an appealing price point following a period of profit-taking. This recommendation comes after the bank’s basket of US momentum stocks concluded last week down more than 10 per cent from its June 25 peak. This significant tumble, driven by investors cutting exposure and systematic strategies realising profits, positioned the gauge for its second-worst July in a decade. Bank of America is a global financial institution that provides a range of banking, investing, asset management, and other financial and risk management products and services. Its trading desk regularly offers market insights and investment recommendations to its clientele.
According to traders at Bank of America, if historical patterns hold true, the recent sell-off could be nearing its conclusion. When this particular gauge has experienced similar declines in the past, it has subsequently registered an average gain of 5 per cent in the following month. Adding to this optimistic outlook, seasonal trends may provide an additional boost, with August historically being the best-performing month for the basket over the past decade. The basket currently includes notable names such as Sandisk, Micron Technology, Danaher, Coinbase Global, and Advanced Micro Devices. The desk believes the current weakness signals a favourable near-term entry point, viewing the episode as prolonged profit-taking rather than a structural market shift.
The sentiment is echoed by other financial players on Wall Street, with UBS’s trading desk earlier this week also indicating that the slide in momentum stocks might be concluding, thereby creating an opportunity for investors to begin rebuilding positions, particularly in artificial intelligence and semiconductor shares. Bank of America’s traders recommend clients consider purchasing the US High Momentum index or US TMT High Momentum index through swaps or August call options. They noted that previous third-quarter drawdowns have typically bottomed around late July, with the subsequent rebound often aligning with the peak of the earnings season.
